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Joint stock company

  1. Joint Stock CompanyJoint Stock Company
  2. Definition of Joint Stock CompanyDefinition of Joint Stock Company Company means a company formed and registered under this Act or existing company. (Company Act, 1994) A joint stock company is ‘an association of many persons who contribute money or money’s worth to a common stock and employ it for a common purpose’. Joint Stock Company is a new venture in the big business area. After industrial revolution, there must be changed in the production system.
  3. Definition of Joint Stock CompanyDefinition of Joint Stock Company Justice Marshall : “A company is an artificial being, invisible, intangible and existing only in contemplation of law”. Justice Lindley : “A company is a voluntary association or an organization of many persons who contribute money or moneys worth to a common stock and employ it in some trade or business and who share the profit or loss arising therefore”
  4. 1. Corporate personality 2. Joint capital 3. Share capital 4. Transferability of share 5. Limited liability 6. Statutory responsibility 7. Number of shareholder 8. Independent nature of management 9. Democratic norm 10.Profit distribution 11.Tax payment 12. Dissolution Features of a Joint Stock CompanyFeatures of a Joint Stock Company
  5. Advantages of a Joint Stock CompanyAdvantages of a Joint Stock Company The power and presence of corporations in American business suggest that this form has certain advantages over other forms of business ownership:  High amount of capital  Limited liability  Low risk investment  Perpetual succession  Separate entity  Transferability of share  Efficient management  Credit facility
  6. As was true with the other forms of business organization , the corporation has some disadvantages. Some of the more obvious ones follow: 1.Complexity of formation 2.Creation of monopoly business 3.Bureaucracy 4.Nepotism 5.High administrative cost 6.Overlook to the shareholder 7.Scope of fraud 8.Tide following of law 9.Expose of secrecy Disadvantages of a Joint Stock CompanyDisadvantages of a Joint Stock Company
  7. Classification of CompanyClassification of Company Joint Stock Company Chartered Company Statutory Company Registered Company Limited Company Unlimited Company Private limited Company Public Limited Company Company Limited by Share Company Limited by Guarantee Others Company Special Company Foreign Company Unregistered Company Existing Company
  8. Chartered companyChartered company In 1844, the first Company Act was issued in the England . A chartered company is a company which is incorporated by royal charter obtained from the crown. This type of company is in vogue in England a century ago. The examples of such companies are:  The Chartered Bank of England  Chartered Mercantile Bank of India and  East India Company.
  9. Statutory companyStatutory company A company formed and regulated by the special Act of legislature is known as a statutory company. Usually such companies are formed for the purpose of maintaining and accelerating the pace of economic development in the country. The examples of statutory companies are as follows:  Bangladesh Bank  Bangladesh Biman  BRTA  WASA  DESA  TNT  PDB
  10. Registered CompanyRegistered Company A registered company means a company formed and registered under the companies Act 1994. Broadly there are two types of registered companies from the view point of liabilities of members: 1 . Limited company : A limited liability company of which the liability of each member is limited to the face value of the share held by him and the capital of the company is divided into the number of shares. This type of company is two types:  Private Limited Company: A private limited company means a company which by its articles of association, a) Restricts the right to transfer the shares b) Limits the number of its members to fifty excluding persons who are in the employment of the company c) Prohibits any invitation to the public to subscribe for the shares or debentures of the company.
  11.  Public Limited Company: It is a voluntary Association of at least seven or more persons, authorized and recognized under the law as a separate legal entity apart from its owners who agree to supply capital and share the profits or losses. A public limited company may be of two types which are the following: a) A company limited by shares : It is a company, of which the liability of each shareholder is limited to the face value of the shares held by him. If he pays the full amount of his share, he gets freed from any other liability. b) A company limited by guarantee : A company is called a company limited by guarantee, when each shareholder undertakes to contribute a certain amount to the liability of the company in the event of its being wound up while he is a member, In this company which members are bearing a company limited by guarantee, for the unpaid amount of share they are liable. If they paid full amount of share they are free from the liability. This organization is usually formed for furthering the cause of education or some professional cause.
  12. 2. Unlimited Company: Unlimited Liability Company is a company of which the liability of each shareholder is unlimited- each shareholder is liable for the debts of the company to an unlimited extent. In other words the liability of the member extends beyond the face value of shares held by him to his personal properties.
  13. Differences between Private Limited andDifferences between Private Limited and Public Limited CompanyPublic Limited Company Particulars Private Limited Public Limited 1. Formation 2.Number of Members 3. Starting of work 4. Sales of share 5. prospectus 6. Transfer of shares
  14. Differences between Private Limited andDifferences between Private Limited and Public Limited CompanyPublic Limited Company Particulars Private Limited Public Limited 7. Size of capital 8. Minimum capital 9. Board of director 10.Statutory meeting 11. Right of voting 12. Articles of association
  15. Economic Importance of Joint Stock Company in Bangladesh  Establishment of large scale business  Proper scope of investment  Encouraging savings and forming capital  Facilities of risk distribution  Creating opportunities of employment  Use of modern technology and techniques  Observing social responsibility  Establishing international relation  Developing management profession
  16. Method of the Formation of a Joint Stock Company 1. Promoting state : In the first stage, few persons involve with the generating idea about the formation of a company. The persons who involve with the formation of company is called promoter. In the initial state the promoters take decision about the following:  Taking necessary decision  Collecting name clearance
  17. 2. Preparation of documents: In this stage, the promoters prepare two important documents which as follows: a)Memorandum of association :Memorandum of association is a charter which contains the fundamental conditions upon which the company is incorporated. It includes company’s name, address, amount of capital, objectives, rights and duties of shareholders. b)Articles of association : Articles of association refers to the document which contains rules and regulations for the internal administration of the business.
  18. c) Certificate of incorporation collection: In this stage, the promoters collect registration form from the registration office and submit it within thirty days with some important documents. The important documents are as follows:  A copy of memorandum of association  A copy of article of association  The name, address and profession of the promoters who want to be director  A sign with declaration for obeying the duty as a director  A agreement for collecting share of competence  A declaration of obeying all the rules and regulations for promoting the company by a lawyer.
  19. 4. Certificate of commence collection: In this stage, the promoters of a public limited company prepare a prospectus. The company wants to collect capital by issuing share to the pubic by taking permission from the Security and Exchange Commission. For collecting the certificate of commencement, the promoters submit few documents with application which are as follows: ¤ Minimum capital is collected and the directors are collected the share in cash. ¤ Prospectus or like declaration for collecting shares from the public. 5. Commence collection : After getting letter of commencement the company start the work.
  20. Definition of Minimum SubscriptionDefinition of Minimum Subscription Minimum subscription is the amount of money is to be collected share subscription for starting a joint stock company . The minimum amount of money is collected by the promoters of the company in the articles of association and prospectus according to the companies act.
  21. Prospectus is an appeal to the public to subscribe shares or debentures offered to the public. The main objective of prospectus is to persuade the people to purchase shares and to give all necessary information to guide the potential investors. According to the Companies Act-1994, Section- 142, “Document containing offer of shares or debentures for sale to be deemed a prospectus”. A public limited company, after its registration, issues the prospectus to the public with a view to draw their attention and creating confidence in their minds for subscribing shares or debentures on behalf their company. Meaning of ProspectusMeaning of Prospectus
  22. Contents of ProspectusContents of Prospectus • Name of the company • Address of the registered office • Objectives of the company • Name, address and profession of the promoters • Short description of memorandum of association • Short description of articles of association • Name, address and profession of board of directors and managing director • Name, address and profession of profession • Salaries and compensation of the directors • Authorized capital of the company • Signature of the directors
  23. Contents of ProspectusContents of Prospectus • Classification of share and amount of capital involved with the each share • Name and address of the bank, broker, auditor and accountant • Rules of inspection of accounts • Description about the contract with the other company • Preliminary expenses for forming the company • Reserve fund and way of converting fund to capital • Profit-loss and final accounts for the existing company • Time and date for receiving application for subscribing shares and debentures • Date of issue of prospectus • Specimen copy of applications of share and debenture
  24. Definition of ShareDefinition of Share Share means small parts of total capital of a company. The company collect big amount of capital by issuing shares to the public. According to the Companies Act-1994, Section-2(1) : “Share means a share in the capital of the company, and includes stock except when a distinction between stock and shares is expressed or implied”.
  25. DebentureDebenture Any instrument under seal evidencing a deed , the essence of it being the admission of indebtedness. Debenture includes debenture stock , bonds and any other securities of a company , whether constituting a charge on the assets of company or not.
  26. Underwriting / UnderwriterUnderwriting / Underwriter The term underwriter means any person who has purchased from an issuer with a view to , or sells for an issuer in connection with . Underwriter means a financial institution , usually an issuing house or merchant bank that guarantees to buy a proportion of any unsold shares when a new issue is offered to the public .
  27. Pattern of Company ManagementPattern of Company Management Shareholder Board of Director Managing Director General Manager Divisional Mgt Purchase Divisional Mgt Sales Divisional Mgt HRM Divisional Mgt Finance
  28. Modes of winding upModes of winding up There are three methods of winding up a Company : 1.Compulsory winding up by Court. 2.Voluntary winding up by members themselves or by the creditors . 3.Voluntary winding up under the supervision of the Court.
  29. Compulsory winding upCompulsory winding up Compulsory winding up takes place when a Company is directed to be wound up by an order of Court A company may be wound up by the court under the following circumstances : 1. Special Resolution of the Company 2. Default 3. Not Commencing or Suspending the Company (within the incorporation ) 4. Reduction of members 5. Inability to pay debts 6. The just and equitable clause (incorporation fail , exercise power unfairly , illegal business)
  30. Voluntary winding up by membersVoluntary winding up by members themselves or by the creditorsthemselves or by the creditors Voluntary winding up means winding up by the members themselves without the intervention of the court . A company can be wound up voluntarily under the following cases : 1. By an Ordinary Resolution of the members passed in a general meeting Company duration fixed - Expired duration Any event - event occurred. 2. By a Special Resolution passed by the members in all other cases. (private cases )
  31. Voluntary winding up under theVoluntary winding up under the supervision of the Courtsupervision of the Court At any time after a company has passed a resolution for Voluntary winding up , the court may make an order that the voluntary winding up shall continue but subject to supervision of the Court. The supervision order is usually made for the protection of the creditors and contributories of the company.
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